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Boeing: A Jobs Case Study

For those who wonder if the Obama administration’s policies really affect job creation, the decision of the National Labor Relations Board to try to block Boeing from installing a production line at their factory in South Carolina to produce their 787 Dreamliner should answer the question. The facts are straightforward:

1. Boeing bought the factory in North Charleston – which made Dreamliner components – from Vought Aircraft in July 2009. The local workers voted to decertify the International Association of Machinists union in September. In November Boeing announced expansion to assemble about one third of the Dreamliners with 4000 additional employees. (Boeing will still be hiring to produce two thirds of the Dreamliners in Seattle.) Production begins in mid-2011 with deliveries in early 2012. Labor costs will be lower and, more importantly, the impact of a potential strike in Seattle will be diminished.

2. The commercial aircraft industry is a cornerstone of American manufacturing and exports. Boeing employs 159,000 people in 60 countries in high paying aircraft and aerospace jobs. They have “bet the ranch” on a new generation of aircraft, the 787 Dreamliner, which is currently in flight testing with almost 700 orders from over 50 global customers after three years of technical delays. Boeing’s aircraft manufacturing is concentrated in the Seattle area where aggressive unions have frequently called extended disruptive strikes.

3. The global commercial aircraft industry is dominated by Boeing and European conglomerate EADS with a few smaller competitors. China has identified aviation as a priority for their national industrial strategy – the Aviation Industry Corporation of China (AVIC) will be a formidable competitor in a few years.

4. If America had an industrial strategy it would focus on those industries which have a high technological content and in which we are globally competitive – such as telecommunications, computers, pharmaceuticals, automotive, energy, and aerospace. Policies would encourage keeping these jobs in the United States.

5. The Obama administration has been a disappointment to the labor unions – despite the fact that Andy Stern of the Service Employees International Union and Richard Trumka of the AFL-CIO have enjoyed ready access to the president. In 2009 and 2010 when the Democrats controlled the House and Senate Obama did not deliver “card check” which would have eliminated secret ballots for union organizing votes (placing all of their efforts behind Obamacare instead), and many feel that the administration has not been visible enough in public employee pension debates. As the 2012 election cycle begins, a chit is being called.

6. Most broadly, this is the latest chapter in the battle between organized labor and the 22 “right to work” states where employees cannot be forced to join a union as a condition of employment. It is a replay of the auto industry in the 70s when foreign manufacturers agreed to limit imports and placed their US manufacturing in the South. In general, these states have lower unemployment and lower wages. Over recent decades it is these states where manufacturing jobs have been created.

7. In this specific case the charge is that Boeing is illegally retaliating for past legal strikes in Washington state. Boeing’s claim is that it is a forward-looking strategic move to disperse their manufacturing – and that they are concurrently increasing jobs in Washington. The NLRB, stuffed with Obama appointees, agrees with the union.

8. While it is highly likely that Boeing will prevail, South Carolina’s concern is that less well financed employers will be deterred from establishing production there. That is the objective. Whether America remains the world’s largest manufacturing country with high skill, high paying jobs is apparently not the administration’s concern.